A blog about law and fiduciary relationships in a variety of contexts, including real estate, trusts and LLCs

Could Breach of Contract Be Immoral?

Prof. Seana Shiffrin of UCLA Law School tackles the issue of “contract law’s strong traditional bar on punitive damages for intentional, gratuitous breach of contract.”

She jumps right into the fray: “Morality, I claimed, correctly regards some breaches of promise as morally wrong and as warranting not only compensation but the administration of morality’s punitive remedies, including blame, criticism, recrimination, and avoidance.”

That is a valid point. There are times when morality must be part of contract law. States Prof. Shiffrin, “The contract law invokes promise as the fundamental component of a contract but, puzzlingly, does not subject gratuitous breaches of contract (and hence breaches of promise) to the distinctive punitive measures endorsed and administered by law, save when those breaches are also torts.”

The argument continues. “If the law’s rationale for the bar on punitive damages is that the prospect of punitive damages might discourage efficient breach of contract – I label this the efficient-breach rationale – then the divergence between morality’s response to breach and the law’s response to breach is problematic in ways that morally decent citizens cannot accept.”

“The efficient-breach rationale forwards a justification for a legal doctrine that consists in the claim that barring punitive damages would encourage and facilitate certain breaching behavior.”

“But this behavior is condemned by morality. To the extent the law adopts and embodies this rationale, it thereby embraces and tries to encourage and facilitate immoral behavior. Although the law need not enforce morality as such, it is problematic when the law, either directly, or by way of the justifications underlying the law, embraces and encourages immoral action.”

Amen. It’s about time someone steps up like this. The law of contracts should not turn a blind eye to contract that is immoral.

Prof Shiffrin concludes that “Citizens, who in a democratic polity must be thought of as partial authors of the law, cannot, in all consistency, accept such laws and their justifications while simultaneously acting and reasoning as moral agents. The law ought not to be structured or justified in ways that place citizens in such an untenable position: it must accommodate the needs of moral agency even if it need not or should not enforce morality directly.”